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Equity One DEF 14A 2009 SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed by
the Registrant x
Filed by
a Party other than the Registrant o
Check the
appropriate box:
EQUITY
ONE, INC.
(Name of
Registrant as Specified in Its Charter)
(Name of
Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
 1600 N.E.
Miami Gardens Drive
North
Miami Beach, Florida 33179
(305)
947-1664
March 31,
2009
Dear
stockholder:
The board
of directors and officers of Equity One, Inc., a Maryland corporation, join us
in extending to you a cordial invitation to attend the 2009 annual meeting of
our stockholders. This meeting will be held on Wednesday, May 13,
2009, at 9:00 a.m., local time, at the Fairmont Turnberry Isle Resort &
Club, 19999 West Country Club Drive, Aventura, Florida 33180.
As
permitted by the rules of the Securities and Exchange Commission, we have
provided access to our proxy materials over the
Internet. Accordingly, we are sending a Notice of Internet
Availability of Proxy Materials, or E-proxy notice, on or about March 31, 2009
to our stockholders of record on March 16, 2009. The E-proxy notice
contains instructions for your use of this process, including how to access our
proxy statement and annual report and how to authorize your proxy to vote
online. In addition, the E-proxy notice contains instructions on how
you may receive a paper copy of the proxy statement and annual report or elect
to receive your proxy statement and annual report over the
Internet.
If you
are unable to attend the annual meeting in person, it is very important that
your shares be represented and voted at the meeting. You may
authorize your proxy to vote your shares over the Internet as described in the
E-proxy notice. Alternatively, if you received a paper copy of the
proxy card by mail, please complete, date, sign and promptly return the proxy
card in the self-addressed stamped envelope provided. You may also vote by
telephone as described in your proxy card. If you vote your shares over the
Internet, return your proxy card by mail or vote by telephone prior to the
annual meeting, you may nevertheless revoke your proxy and cast your vote
personally at the meeting.
We look
forward to seeing you on May 13, 2009.
Sincerely,
EQUITY
ONE, INC.
1600
N.E. Miami Gardens Drive
North
Miami Beach, Florida 33179
—————————————
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
be held on May 13, 2009
—————————————
To
our stockholders:
You are
cordially invited to attend the 2009 annual meeting of the stockholders of
Equity One, Inc., a Maryland corporation, which will be held at The Fairmont
Turnberry Isle Resort & Club, 19999 West Country Club Drive, Aventura,
Florida 33180, on May 13, 2009 at 9:00 a.m., local time. At the
meeting, stockholders will consider and vote on the following
matters:
If you
own shares of our common stock as of the close of business on March 16, 2009,
you can vote those shares by proxy or at the meeting.
Whether
or not you plan to attend the meeting in person, please authorize your proxy to
vote your shares over the Internet, as described in the Notice of Internet
Availability of Proxy Materials, or E-proxy notice. Alternatively, if you
received a paper copy of the proxy card by mail, please mark, sign, date and
promptly return the proxy card in the self-addressed stamped envelope provided.
You may also authorize your proxy to vote your shares by telephone as described
in your proxy card. Stockholders who vote over the Internet, who return proxy
cards by mail or vote by telephone prior to the meeting may nevertheless attend
the meeting, revoke their proxies and vote their shares in person.
North
Miami Beach, Florida
March 31,
2009
TABLE OF CONTENTS
2009
ANNUAL MEETING
OF
STOCKHOLDERS
OF EQUITY ONE, INC.
—————————————
PROXY
STATEMENT
—————————————
QUESTIONS
AND ANSWERS
Under the
rules of the New York Stock Exchange, brokerage firms may have the authority to
vote their customers’ shares on certain routine matters for which they do not
receive voting instructions, including the uncontested election of directors and
ratification of the independent registered certified public accounting
firm. Therefore, brokerage firms may vote such shares with respect to Proposals
1 and 2.
Our board
of directors will review any stockholder proposals that are timely submitted and
will determine whether such proposals meet the criteria for inclusion in the
proxy solicitation materials or for consideration at the 2010 annual meeting. In
addition, the persons named in the proxies retain the discretion to vote proxies
on matters of which we are not properly notified at our principal executive
offices on or before 60 days prior to the annual meeting and also retain
such authority under certain other circumstances.
CORPORATE GOVERNANCE AND RELATED MATTERS
Our
business, property and affairs are managed under the direction of our board of
directors, except with respect to those matters reserved for our
stockholders. Our board of directors establishes our overall
corporate policies, reviews the performance of our senior management in
executing our business strategy and managing our day-to-day operations and acts
as an advisor to our senior management. Our board’s mission is to
further the long-term interests of our stockholders. Members of the
board of directors are kept informed of our business through discussions with
our management, primarily at meetings of the board of directors and its
committees, and through reports and analyses presented to
them. Significant communications between our directors and senior
management occur apart from such meetings. The board and each of its
committees – audit, compensation, executive and nominating and corporate
governance – also have the authority to retain, at our expense, outside counsel,
consultants or other advisors in the performance of their duties.
Charters
for the audit, compensation and nominating and corporate governance committees,
our corporate governance guidelines and our code of conduct and ethics may be
viewed on our website at www.equityone.net under the
“About Us” tab. These documents are also available without charge to
stockholders who request them by contacting Equity One, Inc. — Investor
Relations, at 1600 N.E. Miami Gardens Drive, North Miami Beach, Florida
33179.
Independent Directors
Under the
corporate governance standards of the New York Stock Exchange, or NYSE, at least
a majority of our directors and all of the members of our audit committee,
compensation committee and nominating and corporate governance committee must
meet the test of “independence” as defined by the NYSE. The NYSE
standards provide that to qualify as an “independent” director, in addition to
satisfying certain bright-line criteria, the board of directors must
affirmatively determine that a director has no material relationship with us
(either directly or as a partner, shareholder or officer of an organization that
has a relationship with us). The board of directors has determined
that each of Messrs. Ben-Ozer, Cassel, Flanzraich, Hetz and Linneman and Ms.
Cohen satisfy the bright-line criteria and that none has a relationship with us
that would interfere with such person’s ability to exercise independent judgment
as a member of our board. Therefore, following the election of the
director candidates at the annual meeting, we believe that 67% of our board
members will be independent under those rules.
Nominations for Directors
The
nominating and corporate governance committee will consider nominees for
director suggested by stockholders in written submissions to our corporate
secretary. In evaluating nominees for director, the committee does
not differentiate between nominees recommended by stockholders and
others. In identifying and evaluating candidates to be nominated for
director, the nominating committee reviews the desired experience, mix of skills
and other qualities required for appropriate board composition, taking into
account the current board members and our specific needs as well as those of the
board. This process is designed so that the board of directors
includes members with diverse backgrounds, skills and experience, and represents
appropriate financial and other expertise relevant to our
business. In addition to the personal qualifications of each
candidate, the committee will consider, among other things, the
following:
claims or grievances against us or others, or to further personal interests
or special interests not shared by
our stockholders at large.
The
nominating committee also reserves the right to request such additional
information as it deems appropriate.
Although
the nominating committee’s charter permits it to engage a search firm to
identify director candidates, we did not pay fees to any third parties to assist
in the process of identifying or evaluating director candidates to stand for
election at the annual meeting.
Executive Sessions
Pursuant
to our corporate governance guidelines, our non-management directors meet in
separate executive sessions at least four times a year and as otherwise
determined by the lead director (discussed below). The lead director
may invite our chief executive officer or others, as he deems appropriate, to
attend a portion of these sessions. The non-management directors met
four times in executive sessions in 2008.
Lead
Director
In May
2006, Neil Flanzraich was elected to serve as our lead director and has served
in that capacity since that time. The lead director is an independent
director who acts in a lead capacity to coordinate the other independent
directors, consult with the chairman on board agendas, chair the executive
sessions of the non-management directors and perform such other functions as the
board may direct.
Stockholder Communications
Our board
has implemented a process by which our stockholders and other interested parties
may communicate with one or more members of our board, its committees, the lead
director or the non-management directors or independent directors as a group in
a writing addressed to Equity One, Inc., Board of Directors, c/o Corporate
Secretary, 1600 N.E. Miami Gardens Drive, North Miami Beach, Florida 33179. Such
communications may be made on a anonymous or confidential basis. The board has
instructed our corporate secretary to promptly forward all such communications
to the specified addressees thereof.
Code
of Conduct and Ethics
Our board
of directors has adopted a code of conduct and ethics that applies to all of our
directors, officers, employees and independent contractors. The code
also has specific provisions applicable to all employees with access to, and
responsibility for, matters of finance and financial management, including our
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions. The
full text of the code of conduct and ethics is available at, and we intend to
disclose any amendments to, or waivers from, any provision of the code that
applies to our principal executive officer, principal financial officer,
principal accounting officer or controller or persons performing similar
functions or any other executive officers or directors by posting such
information within four business days of such amendment or waiver on our website
at www.equityone.net.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Meetings
During
the fiscal year ended December 31, 2008, our board of directors held a
total of 10 meetings. Each of our directors attended at least 75% of
the aggregate of (i) the number of the meetings of the board of directors which
were held during the period that such person served on the board of directors
and (ii) the number of meetings of committees of the board of directors held
during the period that such person served on such committee. Although
we have no specific requirement regarding the attendance at the annual meeting
of stockholders by our directors, our bylaws require that a meeting of our
directors be held following the annual meeting of stockholders. In
2008, all but two of our directors attended the annual meeting in
person. Committee Membership
We have
four standing committees: the executive committee, the audit committee, the
compensation committee and the nominating and corporate governance
committee.
The
current members of our committees are as follows:
________________________
* Chair
** Lead
Director
Executive Committee. The
executive committee is authorized to perform all functions which may be lawfully
delegated by the board of directors; provided, however, that the executive
committee may only approve the sale, acquisition or development of properties
with a purchase price or otherwise requiring an equity investment of no more
than $50 million and the acquisition of undeveloped land with a purchase price
of not more than $20 million. The executive committee met or took
action by consent four times during the year ended December 31,
2008.
Audit Committee. The members
of the audit committee are “independent,” as defined under the NYSE listing
standards and the rules and regulations of the Securities and Exchange
Commission, or SEC. The board has determined that each of the members qualifies
as an “audit committee financial expert” as defined by the rules and regulations
of the SEC. The audit committee’s functions include reviewing and discussing our
financial statements, including reviewing our specific disclosures under
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” with our management and independent registered certified public
accounting firm, retaining and terminating the engagement of our independent
registered certified public accounting firm, determining the independence of
such firm and discussing with management and the independent registered
certified public accounting firm the quality and adequacy of our disclosure
controls and procedures and internal controls. The audit committee
met 11 times during the year ended December 31, 2008.
Please
refer to the audit committee report, which is set forth on page 14 of this proxy
statement, for a further description of our audit committee’s responsibilities
and its recommendation with respect to our audited consolidated financial
statements for the year ended December 31, 2008.
Compensation
Committee. The members of the compensation committee are
“independent,” as defined under the NYSE listing standards. The compensation
committee’s functions consist of administering our 2000 Executive Incentive
Compensation Plan, as amended, or 2000 plan, our 2004 Employee Stock Purchase
Plan and our 1995 Stock Option Plan, recommending and approving grants of stock
options and restricted securities under our 2000 plan, recommending, reviewing
and approving our salary, bonus and fringe benefits policies, including
compensation of our executive officers, and discussing with management the
Compensation Discussion and Analysis and, if appropriate, recommending its
inclusion in our annual report on Form 10-K and proxy statement. The
compensation committee also continues to administer the IRT 1998 Long-Term
Incentive Plan and the IRT 1989 Stock Option Plan which we assumed in our
acquisition of IRT Property Company. The compensation committee met
six times during the year ended December 31, 2008. The compensation
committee has the power to create subcommittees with such powers as the
compensation committee may from time to time confer to such subcommittees. For a
description of the role performed by executive officers and compensation
consultants in
determining or
recommending the amount or form of executive and director compensation, see
“Compensation Discussion and Analysis – Management’s and Advisor’s Role in
Compensation Decisions.”
Please
refer to the compensation committee report, which is set forth on page 15 of
this proxy statement, for a further description of our compensation committee’s
responsibilities.
Nominating and Corporate Governance
Committee. The members of the nominating and corporate
governance committee are “independent,” as defined under the NYSE listing
standards. The committee’s duties include establishing criteria for recommending
candidates for election or reelection to the board, considering issues and
making recommendations concerning the size, composition, organization and
effectiveness of the board, including committee assignments, establishing and
overseeing procedures for annual assessment of board and director performance,
evaluating issues of corporate governance and making recommendations to the
board regarding our governance policies and practices. The nominating and
corporate governance committee met four times during the year ended December 31,
2008. The board
of directors proposes that the nominees described below be elected for a
one-year term and until their successors are duly elected and
qualify. All of the nominees are currently serving as our
directors.
Vote
Required
The vote
of a plurality of all votes cast at the meeting at which a quorum is present is
necessary for the election of a director. For purposes of the
election of directors, abstentions will not be counted as votes cast and will
have no effect on the result of the vote, although they will be considered
present for the purpose of determining the presence of a quorum. Since brokers
are permitted to vote for the election of directors in an uncontested election,
there will be no broker non-votes with respect to Proposal 1.
RECOMMENDATION
– The Board of Directors Recommends a Vote FOR Each Named
Nominee
EXECUTIVE OFFICERS
As of the
date of this proxy statement, our executive officers are as
follows:
Mr. Olson
also serves as director. His biographical information can be found in
the section entitled “Proposal 1 – Election of Directors” on page
9.
Thomas Caputo has served as
our president since March 2008. Prior to joining us, from December
2000 to March 2008, Mr. Caputo was executive vice president and head of the
portfolio management and acquisition groups at Kimco Realty Corporation, a
publicly-traded real estate investment trust. From January 2000 to December
2000, he was a principal of H&R Retail, a private real estate company
specializing in development and redevelopment of real estate and located in
Baltimore, Maryland. From April 1983 to December 1999, Mr. Caputo was a
principal with RREEF, a pension fund advisor, where he was in charge of
nationwide retail acquisitions and dispositions and a member of its investment
committee. Prior to joining RREEF, from February 1976 to March 1983,
Mr. Caputo was the principal in charge of retail leasing with Collier Pinkard in
Baltimore, Maryland. He has a B.A. from Randolph Macon
College.
Gregory Andrews
has served as our executive vice president since November 2006 and
assumed the position of chief financial officer in January 2007. From
March 1997 to November 2006, Mr. Andrews served as a principal at Green Street
Advisors, a pre-eminent REIT research and consulting firm, where he was the
firm’s senior equity analyst for retail and health care REITs. From 1996 to
1997, he served as vice president – corporate lending at Bank of America Asia in
Hong Kong and from 1993 to 1996 as vice president – commercial real estate at
Bank of America in Los Angeles and Irvine, CA. From 1988 to 1991, Mr. Andrews
was a registered architect in Washington, DC. Mr. Andrews has an MBA from the
UCLA Anderson School of Management and a B.A. from Princeton
University.
Arthur L. Gallagher
has served as our executive vice president since February 2008, as senior
vice president from December 2006 to February 2008 and as our general counsel
and corporate secretary since joining us in March
2003. Prior to joining us, Mr. Gallagher was with the law firms of
Greenberg Traurig P.A., Miami, Florida, from 1999 to 2003, and Simpson Thacher
& Bartlett, New York, New York, from 1997 to 1999. Mr. Gallagher
received a B.A. from the University of North Carolina – Chapel Hill and a Juris
Doctorate from Duke University School of Law.
Thomas E. McDonough has
served as our executive vice president and chief investment officer since July
2007. Prior to joining us, from April 2006 to July 2007, Mr.
McDonough was a partner at Kahl & Goveia, a private real estate development,
acquisition and management company based in Laguna Beach,
California. Prior to joining Kahl & Goveia, from November 2006 to
April 2007, Mr. McDonough was the national director of acquisitions and
dispositions for Regency Centers Corp., a publicly traded real estate investment
trust that owns approximately 400 shopping centers in major markets located
throughout the Unites States. Prior to assuming his national role at
Regency Centers, from February 1997 to November 2006, Mr. McDonough developed
and acquired shopping centers for Regency Centers and its predecessor, Pacific
Retail Trust, in its Pacific, Mid-Atlantic, and New England
regions. Prior to Regency Centers, from July 1984 to January 1997,
Mr. McDonough served as an associate and development partner with Trammell Crow
Company. Mr. McDonough received his B.S. degree from Stanford
University and his Master of Business Administration from Harvard Business
School.
* * * * *
*
On March
30, 2009, we announced that Mr. Andrews and Mr. McDonough will terminate their
employment with us effective April 24, 2009 and April 30, 2009, respectively,
and that Mark J. Langer will be promoted to serve as our Executive Vice
President and Chief Financial Officer, effective on Mr. Andrews’ departure,
together with his current role as Chief Administrative Officer.
Mr.
Langer, who is 42 years old, joined us in January 2008 and has served since then
as our Senior Vice President, Chief Administrative Officer. Prior to
joining us, Mr. Langer served as Chief Operating Officer of Johnson Capital
Management, Inc., an investment advisory firm, from January 2000 to December
2007. From 1988 to January 2000, he worked in the assurance practice in
the Washington D.C. office of KPMG, LLP. Mr. Langer was admitted as a
partner of KPMG in July of 1998. Mr. Langer received his Bachelors
of Business Administration degree from James Madison
University. The audit
committee has selected and appointed the firm of Ernst & Young LLP to act as
our independent registered certified public accounting firm for
2009. Ernst & Young LLP was first engaged to audit
our financial records for the fiscal year ended December 31, 2005 and
has served as our independent registered certified public accounting firm since
that time. Ratification of the appointment of the registered certified public
accounting firm requires a majority of the votes cast. Any shares not voted,
whether by abstention, broker non-vote, or otherwise, have no impact on the
vote.
Although
stockholder ratification of the appointment of our independent registered
certified public accounting firm is not required by our bylaws or otherwise, we
are submitting the selection of Ernst & Young LLP to our stockholders for
ratification as a matter of good corporate governance practice. Even if the
selection is ratified, the audit committee in its discretion may select a
different independent registered certified public accounting firm at any time if
it determines that such a change would be in the best interests of us and our
stockholders. If our stockholders do not ratify the audit committee’s selection,
the audit committee will take that fact into consideration, together with such
other factors it deems relevant, in determining its next selection of
independent registered certified public accounting firm.
In
choosing our independent registered certified public accounting firm, our audit
committee conducts a comprehensive review of the qualifications of those
individuals who will lead and serve on the engagement team, the quality control
procedures the firm has established, and any issue raised by the most recent
quality control review of the firm. The review also includes matters
required to be considered under the Securities and Exchange Commission rules on
“Auditor Independence,” including the nature and extent of non-audit services to
ensure that they will not impair the independence of any such firm.
Representatives
of Ernst & Young LLP are expected to be present at the annual meeting. These
representatives will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
Fees
Paid to Independent Registered Certified Public Accounting
Firm
The
following table provides information of fees billed by Ernst & Young LLP to
us during or in connection with the years ended December 31, 2007 and 2008 for
services provided:
All audit
and non-audit services were pre-approved by the audit committee, either pursuant
to the audit committee’s pre-approval policy described below or through a
separate pre-approval by the audit committee, which concluded that the provision
of such services by the independent auditors was compatible with the maintenance
of that firm’s independence from us.
Audit Fees. Audit
fees for 2007 and
2008 were incurred for professional services in connection with the audit of our
consolidated financial statements and internal control over financial reporting
for the years ended December 31, 2007 and 2008, reviews of our interim
condensed consolidated financial statements which are included in each of
our quarterly reports on Form 10-Q for the years ended December 31, 2007 and
2008, and preparation of “comfort letters” for the issuance of our securities in
both years. Audit-Related Fees
Audit-related
fees for 2007 were in connection with audits required under rule 3-14
of Regulation S-X promugulated by the Securities and Exchange
Commission. In 2008, we incurred no audit-related fees.
Tax
Fees
In 2008,
we engaged our independent registered certified public accounting firm with
respect to certain tax matters arising from our formation of and contribution of
assets to our joint venture with Global Retail Investors, LLC. Our
independent registered certified public accounting firm did not provide
professional tax services during 2007.
All
Other Fees
In 2007
and 2008, we incurred no other fees.
Pre-Approval Policies and Procedures
The audit
committee’s policy is to review and pre-approve any engagement of our
independent registered certified public accounting firm to provide any audit or
permissible non-audit service to us. The audit committee adopts an
audit and non-audit services pre-approval policy which is reviewed and
reassessed by the audit committee annually. This policy includes a
list of specific services within certain categories of services, including
audit, audit-related, tax and other services, which will be specifically
pre-approved for the upcoming or current fiscal year, subject to an aggregate
maximum annual fee payable by us for each category of pre-approved
services. Any service that is not included in the list of
pre-approved services must be separately approved by the audit
committee. REPORT OF THE AUDIT COMMITTEE
The
following report of the audit committee does not constitute soliciting material
and should not be deemed filed or incorporated by reference into any of our
other filings under the Securities Act of 1933 or the Securities Exchange Act of
1934.
In
accordance with its written charter adopted by our board of directors, the audit
committee’s role is to act on behalf of the board of directors in the oversight
of our accounting, auditing and financial reporting practices. The
audit committee currently consists of three members, each of whom is
“independent” as that term is defined by the New York Stock Exchange listing
standards and the rules and regulations of the Securities and Exchange
Commission.
Management
is responsible for our financial reporting process including our system of
internal controls, and for the preparation of our consolidated financial
statements in accordance with generally accepted accounting
principles. Our independent accountants are responsible for auditing
those financial statements. It is the audit committee’s
responsibility to monitor and review these processes. It is not the
audit committee’s duty or responsibility to conduct auditing or accounting
reviews or procedures. The audit committee does not consist of our
employees and it may not be, and may not represent itself to be or to serve as,
accountants or accountants by profession or experts in the fields of accounting
or auditing. Therefore, the audit committee has relied on
management’s representation that the financial statements have been prepared
with integrity and objectivity and in conformity with accounting principles
generally accepted in the United States and on the representations of our
independent accountants included in their report on our financial
statements. The audit committee’s oversight does not provide it with
an independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or policies, or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the audit
committee’s considerations and discussions with management and with our
independent accountants do not assure that our financial statements are
presented in accordance with generally accepted accounting principles, that the
audit of our financial statements has been carried out in accordance with
generally accepted auditing standards or that our independent accountants are in
fact “independent.”
In
fulfilling its oversight responsibilities, the audit committee reviewed the
audited financial statements for the fiscal year ended December 31, 2008 with
management, including a discussion of the quality of the accounting principles,
the reasonableness of significant judgments, the clarity of disclosures in the
financial statements and the effectiveness of our disclosure controls and
procedures and internal controls over financial reporting. The audit
committee reviewed the financial statements for the fiscal year ended December
31, 2008 with our independent accountants and discussed with them all of the
matters required to be discussed by Statement of Auditing Standards No. 61
(Communications with Audit Committees), as amended and as adopted by the Public
Company Accounting Oversight Board, including their judgments as to the quality,
not just the acceptability, of our accounting principles. In
addition, the audit committee has received the written disclosures and the
letter from our independent accountants required by applicable requirements of
the Public Company Accounting Oversight Board regarding the independent
accountants’ communications with the audit committee concerning independence and
has discussed with our independent accountants their independence from our
management and from us. Upon its review, the audit committee has
satisfied itself as to our independent accountants’ independence.
Based on
the review and discussions with management and the independent accountants, and
subject to the limitations on its role and responsibilities described above, the
audit committee recommended to our board of directors, and the board of
directors has approved, that the audited financial statements be included in our
annual report on Form 10-K for the year ended December 31, 2008, as filed
with the SEC on March 2, 2009. The undersigned members of the audit
committee have submitted this report to us.
Members
of the Audit Committee
Noam
Ben-Ozer, Chair
Cynthia
Cohen
Nathan
Hetz COMPENSATION COMMITTEE REPORT
The
compensation committee consists of the three directors named below, each of whom
is “independent” under the New York Stock Exchange listing standards. We have
overall responsibility for:
We have
the authority to engage independent compensation consultants or other advisors;
however, no such advisors were engaged in 2008.
We
reviewed and discussed with management the Compensation Discussion and Analysis
that begins on page 16 of this proxy statement. Based on our review and
these discussions with management, we have recommended its inclusion in the
company’s annual report on Form 10-K for the fiscal year ended December 31, 2008
and proxy statement for the company’s 2009 annual meeting of
stockholders.
Members
of the Compensation Committee
Neil
Flanzraich, Chairman
James S.
Cassel
Peter
Linneman
Compensation Committee Interlocks and Insider
Participation
No member
of the compensation committee during 2008 was an officer, employee or former
officer of ours or any of our subsidiaries or had any relationship that would be
considered a compensation committee interlock and would require disclosure in
this proxy statement pursuant to SEC regulations. None of our executive officers
served as a member of a compensation committee or a director of another entity
under the circumstances requiring disclosure in this proxy statement pursuant to
SEC regulations.
COMPENSATION DISCUSSION AND ANALYSIS
Overview
The
following discussion is intended to supplement the more detailed information
concerning executive compensation that appears in the tables and the
accompanying narrative that follow. It is also intended to provide both a review
of our compensation policies for 2008 and describe our compensation policies
with respect to our executive officers. Our goal is to provide a
better understanding of our compensation practices and the decisions made
concerning the compensation payable to our executive officers, including the
chief executive officer, or CEO, and the other executive officers named in the
“Summary Compensation Table” below. These officers are referred to
herein as the “named executive officers.”
The
compensation committee of our board of directors, referred to in this section as
the “committee,” designs and administers our executive compensation program. All
principal elements of compensation paid to our executive officers are subject to
approval by the committee. The Compensation Committee Report appears on page 15
of this proxy statement.
Objectives
The
principal objectives of our executive compensation program are to:
Management’s and Advisor’s Role in Compensation
Decisions
The
committee evaluates the performance of our CEO, Mr. Olson, and determines his
compensation based on this evaluation. Mr. Olson makes
recommendations to the committee of annual compensation to be paid to all other
executive officers. He also makes recommendations for equity awards to other
employees throughout the company. The committee can accept or modify Mr. Olson’s
recommendations as it sees fit.
In the
past, the committee has relied upon outside advisors to ascertain competitive
pay levels, evaluate pay program design, and assess evolving compensation
trends. In 2006, the committee engaged FPL Associates, or FPL, to review our
executive compensation and director compensation programs. FPL’s findings were
relied upon in determining the compensation arrangements with our chairman and
the executive officers we hired in 2006, including Mr. Olson. No
compensation advisors were retained in 2007 or 2008.
Principal Elements of Compensation and
Total Direct Compensation
We have
designed our executive compensation program to include three major elements—base
salary, annual cash bonus incentives and long-term cash and long-term equity
incentives, such as stock options and restricted stock awards. The principal
elements of our executive compensation program are agreed to and determined, for
the most part, at the time of our entry into the applicable employment agreement
with each executive officer which mandates levels and types of compensation,
including certain minimum levels of compensation. These agreements
are described below under the sub heading entitled “Payments upon Termination of
Employment and Change of Control.”
Although
all three of these elements are integrated into our compensation program, the
elements are intended to achieve different objectives:
the interests of
our stockholders because they are tied to our financial and stock performance
and vest or accrue over a number of years, encouraging executives to remain our
employees.
Base Salaries. In
order to attract and retain the most talented executives in our industry, we
must set the base salaries of executive officers at levels that are competitive
with other companies engaged in the retail real estate industry and of
comparable size and scope that compete with us for executive
talent. We expect that the base salaries should be in the upper half
of the range of base salaries for comparable positions and tenure at other large
real estate companies. Although base salaries are generally targeted
at these levels, the actual salary of an executive may be above or below the
targets based on factors unique to that executive, such as experience,
competency or the availability of meaningful peer data for the
executive. In order to benchmark these levels of base salaries, the
committee has in the past engaged compensation consultants, as described above,
and subscribes to and reviews published relevant executive compensation
surveys.
In 2008,
we acquired rights to the National Association of Real Estate Investment
Trust’s, or NAREIT’s, annual compensation survey. This survey was
produced by FPL or its affiliates and had 105 participating companies, both
public and private. The data was compiled for 85 positions and was
broken down by property sector classification, including retail real estate,
company size by capitalization and company size by number of
employees. The survey results described base salary, total annual
cash compensation, long term incentive values and total compensation by
position.
The
committee reviews base salaries of the CEO and the other executive officers
annually and makes adjustments, in light of past individual performance as
measured by both qualitative and quantitative facts and the potential for making
significant contributions in the future. The committee generally considers
individual performance factors in addition to our overall performance in a
particular year in determining base salary levels. For instance, the committee
may consider the completion of one or more strategic projects or transactions,
direct contribution to company goals, promotions, etc. in determining base
salaries of our executive officers.
In the
past, the base salaries of our named executive officers increased annually by
the greater of increases in the consumer price index or a fixed percentage
ranging from three to six percent. However, none of the agreements
with our current executive officers has automatic increases in base salary but
rather leave such increases to the discretion of the committee. In
addition, most of the employment agreements with our executive officers prohibit
us from decreasing the base salaries during the term of the
agreement.
Cash
Incentives. We pay an annual cash bonus to executive officers
based in part on minimum bonuses provided under the executives’ agreements and
in part based on the achievement of specified performance
measures. We determine the specific measures and the possible bonus
amounts annually. With respect to the prior performance year, the committee
determines whether the bonus criteria have been achieved at a meeting in
February or March and bonuses are paid by March 15th of each
year. Because the committee believes strongly in our executives working together
as a team, commencing in calendar year 2008, it set the same specific measures
for corporate objectives for all of our executive officers. A
description of these criteria and the annual cash incentives are set forth below
under the subheading “2008 Compensation Decisions.”
In
addition, in connection with the negotiation of the initial employment
agreements with Messrs. Olson, Andrews and McDonough, we agreed to pay a
one-time, long-term cash bonus. The amounts of these long-term
bonuses range from $0 to $2 million in the case of Mr. McDonough, $0 to $3
million in the case of Mr. Andrews, and $0 to $6 million in the case of Mr.
Olson and are payable if our total stockholder return exceeds both a fixed
minimum return and the average return of a group of our peers over a performance
period that ends in December 2010, or sooner in the event of a change of control
or an executive’s termination without cause. The peers include:
Acadia Realty Trust, Cedar Shopping Centers, Inc., Developers Diversified Realty
Corporation, Federal Realty Investment Trust, Ramco-Gershenson Properties Trust,
Regency Centers Corporation, Saul Centers, Inc. and Weingarten Realty
Investors.
Equity Incentives. The
committee strongly believes that providing executives with an opportunity to
increase their ownership of common stock aligns their interests with the
interests of our stockholders. Therefore, we offer equity incentives which
generally take the form of awards under our stock-based compensation plan, the
Equity One, Inc. 2000 Executive Incentive Compensation Plan, as amended, or the
2000 plan, which is administered
by
the committee. Although the 2000 plan authorizes a variety of equity incentive awards, the only forms of
equity awards the committee has granted have been stock options and
restricted stock.
Under the
employment agreements with our executive officers, the committee may grant
equity incentive awards on an annual basis as it may reasonably determine as
fairly compensating and rewarding the executives for services rendered to us,
subject in each case to minimum awards specified in the executives’ employment
agreements.
Total Annual
Compensation. The committee considers total annual
compensation, in addition to individual elements of compensation, when assessing
the competitiveness of our pay practices. Once again, to gauge this
competitiveness, we reviewed the NAREIT compensation survey. Total
annual compensation for a given year consists of salary, annual cash bonus
earned and the value of the stock options and restricted stock awards earned,
paid or awarded during that year. Bonuses and equity awards with respect to
performance in a given year are generally paid or granted in the following
year.
Other
Elements of Compensation
Retirement and Health and Welfare
Benefits. We have never had a traditional or defined benefit
pension plan. We do, however, maintain a 401(k) retirement plan in which all
employees can participate on the same terms. Under the 401(k) retirement plan,
we match 100% of the participant’s contribution up to 3% of the participant’s
annual compensation and 50% of the contribution for the next 3% of the
participant’s annual compensation. Our matching contributions made
prior to January 1, 2007 become vested pro rata over the first three years of
service; following the third year of service, all contributions are
vested. Matching contributions that are made after January 1, 2007
are 100% vested when made. Our matching contributions are subject to applicable
IRS limits and regulations. The contributions we made to the 401(k) accounts of
the named executive officers are shown in the All Other Compensation column of
the Summary Compensation Table on page 22 and are detailed in footnote 5 to
that table.
Employment, Termination and Change
of Control Agreements. We have employment agreements with each
of our named executive officers. A summary of these employment
agreements appears in the section of this proxy statement entitled “Payments
Upon Termination of Employment and Change of Control.” These agreements provide
for various payments and benefits to be made to the executives if their
employment with us is terminated for certain reasons or if there is a change of
control. The circumstances in which payments may be made and the potential
amounts of those payments are described in more detail below. The payments
provided for in these agreements are to ensure the ongoing commitment of these
executive officers to the best interests of our stockholders in the event of a
change of control or other potential termination events.
Personal
Benefits. We provide certain other benefits to the executives,
including the use of an automobile, reimbursement of expenses related to their
automobiles, automobile allowances or other driver services.
Deferred Compensation
Plan. Until February 2009, we maintained a non-qualified
deferred compensation plan that permitted senior executives and key employees to
defer up to 90% of their base salary and all or any portion of their cash
bonuses. Although we had the discretion to contribute a matching amount or make
additional incentive contributions, we did not do either under the plan. As a
result, all the contributions disclosed in the Nonqualified Deferred
Compensation Table on page 26 represent compensation previously earned by
the executive. In February 2009, all deferred compensation accounts under the
plan were distributed to participants as permitted by the regulations under the
Internal Revenue Code. We do not anticipate permitting employees to
defer compensation under the plan in the future.
For more
information, see the Nonqualified Deferred Compensation Table and accompanying
narrative on page 26. 2008
Compensation Decisions
In 2008,
our executive officers included Messrs. Olson, Caputo, Andrews, Gallagher and
McDonough.
Base Salaries. We
have employment agreements with each of our executive
officers. Therefore, the base salaries of these executives are based
on amounts set forth in those agreements. During the term of these
agreements, the committee has the right to increase, but not decrease, the base
salaries. On February 28, 2008, the committee increased the base salaries for
Messrs. Olson and Andrews by 3.5% effective January 1, 2008, consistent with the
company-wide raises for most employees. In addition, the committee
increased Mr. Gallagher’s base salary to $300,000 also effective January 1,
2008.
Annual Bonuses. In
March of 2008, the committee established three objective performance measures
for annual incentive awards under the 2000 plan. These amounts, together with
the contractual minimum bonuses provided under the employment agreements,
provided for maximum total cash bonuses payable to the executives as set forth
below:
The
performance measures were: Funds from operations, or FFO, per share,
same property net operating income, or NOI, growth and total stockholder return,
each as defined below. The committee determined that these measures
were appropriate because each objective was closely monitored by the REIT
industry and the success of these objectives should contribute to the long-term
success of our stockholders. FFO in particular is believed to
be an appropriate performance measure for REITs because it excludes various
items in net income that do not relate to or are not indicative of the
continuing operating performance of the ownership, management and development of
real estate.
Under the
annual incentive award program, the executives earned points for the achievement
of performance levels. The following chart shows the maximum number of points
achievable for each of the performance measures, the range of performance for
which points were awarded, the actual results achieved by the company in 2008
and the number of points earned by the executives:
As shown
above, the committee determined that a total of four points, out of a possible
12 points, were earned by the executives. Under the terms of the
annual incentive awards, if the executives earned six points or fewer, then they
would receive the minimum bonus provided under their respective employment
agreements. For seven to 12 points, each executive would be paid an
amount in excess of his minimum bonus equal to the proportion of points earned
above six. Therefore, based on the performance levels in 2008, no
executive earned an annual
incentive award. Instead, the only cash
bonuses that were paid to Messrs. Olson, Caputo, Andrews, Gallagher and McDonough were their contractual minimums of
$500,000; $150,000, $181,125, $100,000 and $150,000,
respectively.
For the
purpose of determining bonuses, the performance measures were defined as
follows:
Equity Awards. For 2008, the
committee awarded each of the executives either restricted stock or options, or
both, in the minimum amounts and with the annual vesting required by their
employment agreements. In the case of Mr. Olson, he received an option to
purchase 200,000 shares of our common stock vesting over two
years. Mr. Caputo received an option to purchase 100,000 shares of
our common stock vesting over four years. Mr. Andrews was awarded
12,500 shares of restricted stock and an option to purchase 100,000 shares, each
vesting over four years. Mr. Gallagher was awarded 7,500 shares of
restricted stock and an option to purchase 150,316 shares, each vesting over
three years. Mr. McDonough was awarded 10,000 shares of restricted
stock and an option to purchase 75,000 shares, each vesting over a period of
four years.
2009
Compensation Decisions
Base Salaries. On
February 2, 2009, in connection with company cost reduction initiatives, each of
the executive officers, other than Mr. Andrews, voluntarily agreed to reduce
their base salaries by 10%. The voluntary reduction was
intended to apply for the 2009 calendar year only and was not intended to affect
the determination of other amounts owing or to be owed under the executives’
respective employment agreement that were based on the base salary (e.g.,
termination payments, etc.).
Annual Bonuses. The committee
is currently working with our CEO to determine the annual cash and long-term
incentive plans for 2009.
In
addition, for information regarding payments to be made to Messrs. Andrews and
McDonough in connection with the termination of their employment with us, see
“Payments upon Termination of Employment and Change of Control”
below.
Tax
Issues
Section
162(m). Section 162(m) of the Internal Revenue Code disallows
a federal income tax deduction to publicly-held companies for compensation paid
to certain executives to the extent their compensation exceeds $1 million in any
fiscal year. The limitation applies only to compensation that is not considered
“performance-based.” Base salaries, minimum bonuses and awards of restricted
stock that vest merely upon the passage of time do not
qualify as performance-based
compensation. Stock options granted by the committee under the 2000
plan are made with exercise prices equal to the fair market value of a share on
the grant date and, therefore, should qualify as performance-based compensation for this
purpose.
As long
as we qualify as a REIT, we do not pay taxes at the corporate level. To the
extent that any part of our compensation expense does not qualify for deduction
under Section 162(m), a larger portion of stockholder distributions may be
subject to federal income tax as ordinary income rather than return of
capital.
Section 409A. On
October 22, 2004, the American Jobs Creation Act of 2004 was signed into law,
changing the tax rules applicable to nonqualified deferred compensation
arrangements. As amended, Section 409A of the Internal Revenue Code affects the
payments of certain types of deferred compensation to key employees. We believe
we are operating in compliance with the statutory provisions which were
effective January 1, 2005.
Other
Compensation Policies
Stock Option and Equity Award Grant
Practices. The committee usually makes annual equity awards at
its quarterly meeting in February or March each year. In 2009, the awards were
made at the committee’s regularly scheduled meeting on February 23, 2009. The
grant date of those awards is the date of the meeting, which date is determined
without regard to current or anticipated stock price levels or the release of
material non-public information and is set during the prior calendar
year.
The
committee may also make, and in the past has made, special grants during the
course of the year, primarily for new hires, promotions to retain valued
employees or to award exceptional performance. These special grants
may be subject to performance or time vesting, and are issued on the date of
grant approval or upon a date certain following the grant approval date, such as
the date on which a new hire commences his or her employment with the
company.
The
exercise price for any equity award is equal to the fair market value of the
company’s common stock on the date of grant. Under the 2000 plan, the
fair market value is equal to the closing sales price for a share of our common
stock as reported on the New York Stock Exchange on the effective date of the
grant as approved by the committee or the board of directors, unless otherwise
approved by the committee. Under the employment agreements with
several of our executives, the committee determined the fair market value of our
common stock, and therefore the exercise price, by computing the average closing
price of our common stock for the ten trading days immediately prior to the
grant date.
Stock Ownership
Guidelines. The committee has not adopted any stock ownership
guidelines for our executives or directors. The committee does,
however, periodically review the levels of equity ownership by its executives
and the periodic sales activity by those executives.
Recovery of Performance-based
Awards. We do not have a policy regarding the recovery of
performance-based awards in the event of a financial statement restatement
beyond the requirements of Section 302 of the Sarbanes-Oxley Act of 2002. That
statute requires the chief executive and chief financial officers of a
publicly-held company to repay certain amounts if the company restates its
financial statements as a result of financial reporting misconduct. The amounts
to be repaid consist of (1) any bonus or other incentive-based or equity-based
compensation received from the company during a twelve month period following
the filing of the financial document in question; and (2) any profits realized
from the sale of securities of the company during that period. SUMMARY COMPENSATION TABLE
The table
below summarizes the total compensation paid or awarded to each of our named
executive officers for 2008, 2007 and 2006. For a more thorough
discussion of our executive compensation program, see Compensation Discussion
and Analysis which begins on page 16 of this proxy statement.
———————————
————————
GRANTS OF PLAN-BASED AWARDS
—————————
2008
OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END
——————————
The
shares of restricted stock vest as follows: (a) pro rata over the two year
period commencing December 31, 2009, (b) pro rata over the four year
period commencing March 14, 2009, (c) pro rata over the four year period
commencing February 28, 2009, (d) on December 31, 2009, (e) pro rata over the
three year period commencing February 28, 2009, (f) pro rata over the two year
period commencing July 29, 2009.
2008
OPTION EXERCISES AND STOCK VESTED
————————
2008
NONQUALIFIED DEFERRED COMPENSATION
————————
We did
not at any time make any contribution to the accounts of our deferred
compensation plan. As a result, the contributions and aggregate
balances shown in the table above are composed entirely of contributions made by
the executive from his base salary. The earnings do not represent
above-market or preferential rates. Deferral elections were made by the
executive in December of each year for amounts to be earned in the following
year. Under the plan, executives could defer up to 90% of his or her
base salary and all or any portion of their cash bonuses.
In
February 2009, all deferred compensation accounts under the plan were
distributed to participants as permitted by the regulations under the Internal
Revenue Code. We do not anticipate permitting executives to defer
compensation under the plan in the future.
DIRECTOR
COMPENSATION
Non-employee
directors are eligible to receive 2,000 shares of common stock upon their
initial election to the board of directors and 2,000 shares of common stock
annually on January 1 of each year of their service, which shares shall vest, in
each case, half on December 31 of the year of the grant and the other half on
December 31 of the following year. In addition, our lead director
receives an additional 1,000 shares of common stock annually on January 1, which
shares vest in the same manner as the other shares granted to
directors. In addition, non-employee directors receive an annual fee
in the amount of $12,000, chairmen of committees (other than the audit
committee) receive an annual fee of $7,500 and committee members (other than
members of the audit committee) receive an annual fee of $6,000. The
audit committee chairman receives an annual fee in the amount of $15,000, and
audit committee members receive an annual fee of $10,000. In
addition, each non-employee director will receive a fee of $1,500 for each
meeting attended in person or telephonically, plus reimbursement for reasonable
expenses incurred in attending the meeting. Mr. Olson, who is also
our chief executive officer, is not paid any director’s fees. In
addition, Mr. Katzman, our chairman of the board, is paid pursuant to the terms
of a chairman compensation agreement, which is described separately below under
the section entitled “Payments upon Termination of Employment and Change of
Control,” and is not paid any of the director fees described
above. The
following table summarizes the compensation of our non-employee directors in
2008:
——————————
The cost
of each award included in the aggregate cost is as follows:
The
following table sets forth the aggregate number of shares of restricted stock
and stock options held by each non-employee director as of December 31,
2008.
The
aggregate FAS 123R grant date value of the restricted stock awards granted in
2008 was as follows:
PAYMENTS
UPON TERMINATION OF EMPLOYMENT AND CHANGE OF
CONTROL
Agreements
with our chairman and each of our executive officers require or required us to
make certain payments and provide certain benefits to them in the event of a
termination of their agreement or employment, as applicable, following a change
of control of our company. This section provides a discussion of
those payments and benefits, along with certain other terms of those agreements
that are in effect as of the date of this proxy statement.
Jeffrey
Stauffer, our former executive vice president and chief operating officer,
resigned effective as of February 29, 2008. No severance payments
were made to him following his resignation.
Our Chairman’s Compensation
Agreement. Chaim Katzman has served as our chairman of the
board since we were founded in 1992. Until December 2006, he also
served as our CEO and was therefore an employee-director. Effective
January 1, 2007, following his resignation as CEO and the termination of his
employment, we entered into a chairman’s compensation agreement with him. The
term of this agreement ends December 31, 2010 and will automatically renew for
successive one-year periods unless either party gives the other written notice
of termination at least six months before its expiration.
In
connection with his agreement, Mr. Katzman was awarded an option to purchase
437,317 shares of our common stock at an exercise price of $24.12, which option
vests pro rata over a four year period commencing December 31,
2007. In 2008, we recognized an expense equal to $346,767 under FAS
123R based on the assumptions described in footnote 4 to our Summary
Compensation Table above with respect to this option award. In
addition, Mr. Katzman received 300,000 shares of restricted stock, which shares
also vest pro rata over the four year period commencing December 31, 2007. In
2008, we recognized an expense equal to $2,035,087 under FAS 123R based on the
assumptions described in footnote 3 to our Summary Compensation Table above with
respect to this restricted stock award. Mr. Katzman is also eligible
for an annual bonus in the discretion of the committee. He did not
receive a bonus in 2008.
If the
chairman’s agreement is terminated due to death or "disability" (as defined in
the agreement) of Mr. Katzman other than following a “change of control” (as
defined in the agreement), Mr. Katzman or his estate will be entitled to receive
an amount equal to his most recent bonus, if any, and all stock options and
shares of restricted stock shall fully vest as of the date of such
termination. If the agreement is terminated (a) by us “without
cause,” (b) by Mr. Katzman for “good reason” or (c) voluntarily by Mr. Katzman
following a “change of control” (as such terms are defined in the agreement),
Mr. Katzman will receive a lump-sum payment equal to three times the sum of (i)
his most recent bonus, if any, (ii) the “value” of 75,000 shares of the
Company’s common stock (as determined under the agreement) and (iii) the value
of options to acquire 109,329 shares of Company common stock at $24.12 per share
based on the Black Scholes valuation methodology. In addition,
following any termination referred to in the preceding sentence, all options and
restricted stock shall fully vest as of the date of termination or “change of
control,” as the case may be.
If any
amounts and benefits paid to Mr. Katzman are deemed to be “parachute payments”
within the meaning of Section 280G of the Internal Revenue Code and subject to
the excise tax under Section 4999 of the Code, such payments will be “grossed
up” to make Mr. Katzman whole for the impact of such excise tax.
Employment Agreements with Executive
Officers. We have executed employment agreements with Messrs.
Olson, Caputo, Andrews, Gallagher and McDonough. A description of
those agreements is as follows:
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